The Murdoch Brothers

The O’Reilly Scandal Has Divided the Fox News Bunker

But the younger Murdochs appear prepared to follow their father’s playbook. “Lachlan and James want to act like they are cleaning up the environment,” said one former Fox News employee. “They issue these statements; who buys those?”

James and Lachlan Murdoch seen at the annual Allen & Company Sun Valley Conference in Idaho, July 5, 2016.

By Drew Angerer/Getty Images.

Donald Trump has made no secret of his appreciation for Fox News. He grants no outlet more interviews and watches no network more frequently. He speaks with its co-founder and C.E.O., Rupert Murdoch, about once a week, according to a person familiar with the calls. Even as his reliance on the network has created international incidents, as it did when he seized on a Fox News contributor’s statements to accuse Britain’s G.C.H.Q. of spying on him, Trump has remained a loyal viewer. When The New York Timesreported that Bill O’Reilly had settled five lawsuits by women claiming sexual harassment or inappropriate behavior for $13 million, causing advertisers to abandon his show in droves, Trump offered the anchor his unqualified support. (In a statement to the Times, 21st Century Fox said that O’Reilly denies the merits of these claims. A representative for O’Reilly did not respond to repeated requests for comment.)

O’Reilly, Trump told the Times in an interview Wednesday, is “a person I know well—he is a good person.” He also went out of his way to offer some unsolicited advice for the embattled anchor. “I think he shouldn’t have settled; personally I think he shouldn’t have settled,” Trump noted. “Because you should have taken it all the way. I don’t think Bill did anything wrong.”

The statements may have been garden-variety Trump nonsense. (Unless O’Reilly had shared the details of these allegations with Trump, how did the president know what the anchor should have done?) But they traveled through the Fox News bunker like a torpedo. During the past few days, employees have been reeling from the latest headlines in the network’s seemingly never-ending sexual-harassment scandal. Inside the subterranean newsroom, the allegations against O’Reilly have resurfaced a generational divide inside the organization—one between the factions aligned with the company’s founder, Rupert Murdoch, and those aligned with his sons, Lachlan and James, ostensibly a force of modernization, who are invariably still referred to as “the Boys.”

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As Lachlan and James have taken various turns at their father’s company, they often ran up against Rupert’s allies and friends who saw the Boys as unprepared and inexperienced. Even today, there are executives at 21st Century who predate Lachlan and James’s time. O’Reilly is among them. According to several insiders, some young women inside Fox News bemoaned the fact that O’Reilly's contract was recently renewed despite the payments, saying it showed the limits of the Boys’ power. Older Fox News executives, however, feel that the allegations against O’Reilly are old news and opportunistic. In some ways, though, it seems as though Fox News is handling the O’Reilly saga in a manner based on a familiar playbook.

Murdoch raised his sons to one day take over his global newspaper, film, and television empire. When they did so last year, with James as C.E.O. of 21st Century Fox and Lachlan its executive chairman, the brothers imagined a future where they could reshape their father’s stodgy portfolio into a digital and internationally focused enterprise.

But in the space of six months, they have had an unpleasant crash course in the grittier side of managing their inheritance. In their first big management test, the two sons played an integral role in ousting their father’s friend and ally Roger Ailes, the former chairman of Fox News, who faced a growing array of women accusing him of sexual harassment. (Ailes has vociferously denied all allegations.) Crucially, the brothers used a high-profile law firm, Paul, Weiss, to investigate Ailes, but they kept the investigation focused narrowly on him. Rupert Murdoch agreed with his sons’ approach, but it’s also fathomable to imagine that, were it not for the sons, Ailes might still be presiding over the network, his office guns in tow.

In the aftermath of the Ailes scandal, Murdoch Sr. stepped in himself to run Fox News day to day, and kept many of the people from the old Ailes era in place. His sons, however, appeared to try and change the culture. They aggressively wooed Megyn Kelly, for instance, offering her $100 million over four years to be the new face of the network. But after Trump was elected, Kelly left for the more mainstream confines of NBC News, and Fox seemed to return to its natural state, ruled by Old White Men. When the settlements with O’Reilly were reported in The New York Times, they only seemed to confirm that the Murdoch brothers either weren’t successful in cleaning up Fox News, or didn’t try that hard the first time around.

In retrospect, the Ailes investigation looks a lot like the early internal investigations that Rupert Murdoch ordered into phone hacking at his British tabloids. In that case, the company tried to corral the investigation in the U.K., trying at first to weed out only the “bad apples” who had conducted the phone hacking. Only after repeated failed internal investigations and a criminal investigation were the Murdochs forced to close the offending tabloid, News of the World, after advertisers abandoned the paper. (That closure followed a story in The Guardian that revealed that News of the World reporters had hacked into the phone of a missing 13-year-old girl, who was later found dead.) “Getting Roger out of there was not easy,” said one insider. “The reason it was concentrated and aggressive and swift was to get him out.”

Given Ailes’s power within the organization, the Murdochs defended their strategy by telling associates that a broader investigation risked moving too slowly and could allow Ailes, a General Patton enthusiast, to mount a defense and muddy the picture, according to a person familiar with the matter. The Murdochs asked Paul, Weiss to conduct verbal interviews with top on-air talent who had interactions with Ailes. The investigation led them to other women inside the organization, but not beyond Ailes, this same person said.

The Murdoch sons may have had their reasons, but it’s hard not to see their lack of curiousness about the rest of Fox News as an effort to shield their eyes from what lay elsewhere inside the subterranean newsroom. It’s a classic Murdoch maneuver: cut out the damaging people and save the organization. This strategy has some within Fox News wondering whether O’Reilly will indeed survive this scandal. The Murodch boys, after all, are less enamored with Fox News than either their father or the president. And they are far more distant from it than the former. This distance has fueled speculation that the sons may one day want to sell. But that’s an unlikely scenario as long as their father is alive. They are surely aware of the huge profits that Fox News produces every year.

After Ailes left the company, some inside the bunker began to see the limits of the company’s investigation. Fox conducted an extensive inquiry and discovered in November, according to a person familiar with the audit, that O’Reilly had paid a settlement to Rebecca Gomez Diamond, a contributor on the Fox Business Network. The company said nothing publicly about the discovery, but a person familiar with the matter told me that the firm has shared that information with the U.S. Attorney’s Office as part of the larger grand jury investigation into the use of Fox News’s funds by Ailes.

O’Reilly’s run-ins with women have been public since his 2004 settlement with Andrea Mackris, a former Fox News staffer with whom O’Reilly settled for $9 million. “That would have been a good time, and that might be sufficient notice, civilly, to say, Hey, what’s going on?” a former Fox News employee told me.

In the wake of the Ailes ouster, James and Lachlan Murdoch issued joint statements about wanting to create a new environment at Fox News. But one former employee scoffed at this attempt. Nothing had changed, it seemed. “Lachlan and James want to act like they are cleaning up the environment,” this person told me. “They issue these statements; who buys those?”